Short Selling Index Influences Sector Returns More Than Direction... Focus Shifts to Large Sensitive Stocks

[Asia Economy Reporter Lee Seon-ae] NH Investment & Securities has set the KOSPI index band at 3150?3250 for this week (March 3?7).

According to NH Investment & Securities on the 2nd, factors driving the KOSPI index upward include upward revisions of earnings estimates and accelerated global vaccination, while downward factors are expected to include the resurgence of COVID-19 and the possibility of renewed friction between the U.S. and China.

Excessive concern over short selling seems unnecessary. Researcher Nodong-gil at NH Investment & Securities stated, "Regarding the resumption of short selling from the 3rd, its impact is expected to be greater on sector returns and styles rather than on the overall index direction," adding, "Considering that past short selling resumption events led to foreign capital inflows into the KOSPI, it is highly likely that the relative returns of large-cap stocks will improve compared to small- and mid-cap stocks."

Upward revisions continue for estimates of large-cap stocks such as semiconductors and automobiles, and macroeconomic conditions where export growth rates outpace liquidity growth rates are favorable for large-cap stocks. Accordingly, the focus of the domestic stock market is expected to shift toward large-cap stocks following the short selling resumption event.

Researcher Nodong-gil emphasized, "It is a phase where a strategy to increase the proportion of large-cap stocks in the portfolio is necessary," and added, "Sectors of interest include semiconductors, secondary batteries, steel, and chemicals."

However, it will take some time to dispel doubts about the slowdown in the memory semiconductor investment market. Nevertheless, semiconductors are the sector leading the annual improvement in KOSPI corporate profits, and earnings forecasts are also being revised upward. The role of semiconductors as earnings leaders is expected to remain unchanged.

This content was produced with the assistance of AI translation services.